CLS FX Settlement: Value of transactions up modest 3.9% in Sept 15 (launches new FX fwds compression service)

The CLS FX settlement system has reported a modest +3.9% rise in the average daily value of FX trades settled through their platform in Sept 15, taking volumes back up to $4.8trillion/day (up from $4.6trillion/day in Aug 15), and the highest level since Jun 15, although still way below the high of the year of $5.3trillion/day in Jan 15.

The slight monthly rise, is slightly out of line with the modest falls in spot volumes reported by the major FX platforms earlier this month, which saw falls ranging from -8.4% for Reuters to -10.9% for EBS.

Details from the platform and charts are as follows:

CLS value of instructions submitted: $4.81 trillion/day in Sep 15, up +3.9% on the $4.63 trillion/day in Aug 15, although down -19% compared to Sep 14.

CLS number of instructions submitted: 1,081,045/day in Sep 15, down -7.6% on the 1,170,313 in Aug 15, and down -23.8% up on Sep 14 level of 1,419,102.

Average Trade size: $4,45mln in Sep 15, up +12.5% on the $3.96mln in Aug15 and up +6.3% compared to the $4.19mln in Sep 14.

CLS Slearing Sept 15

CLS Clearing charts Sept 15

CLS Data: Value and number of transactions submitted to CLS in Sept 2015

Note: CLS reports both sides of an FX transaction. To adjust the average daily value data to equate to the same reporting convention used by the Bank for International Settlements and the semi-annual foreign exchange committee market reports, the gross values should be divided by two.

Also interestingly, CLS today announced it is to launch an FX forwards & Swaps compression service with ICAP Traiana’s OTC derivatives post-trade and risk reduction service TriOptima. The TriReduce CLS Forward FX Compression Service, completed the first successful compression cycle for FX forwards and swaps transactions.

The new service combines CLS’s infrastructure and market connectivity with TriOptima’s triReduce compression product to enable counterparties to reduce the gross notionals of their outstanding portfolios without fundamentally changing their market positions.

David Puth, CEO of CLS, comments:

“Trade compression is a vital tool in managing risk, leading to strong market demand for a compression service for FX forwards and swaps.

By combining CLS’s infrastructure, network and expertise in the FX market with TriOptima’s knowledge of the OTC derivatives environment and experience with compression in other asset classes, this new service enables institutions to efficiently reduce counterparty and credit exposure and to meet global regulatory requirements.”

Launched at a time when international regulators have encouraged compression services for non-centrally cleared OTC derivatives, the triReduce CLS Forward FX Compression Service is designed to reduce operational, credit and counterparty risk for institutions and enhance capital efficiency. It is consistent with the goals of EMIR, Basel III and Dodd-Frank, all of which seek a more robust and transparent post-trade environment.

Peter Weibel, CEO of triReduce, TriOptima’s compression service, comments:

“Working with CLS and its members underscores our commitment to providing robust and efficient compression services to a broad range of financial market participants. Adding FX forward compression is an important expansion of the asset classes in our catalogue of compression services.”

According to the TriReduce fact sheet, by reducing the FX portfolio, clients will be able to improve the CRD4 element of the Leverage Ratio calculation under Basel III, which requires PFE add-ons for FX forward products. (1% for trades < 1 year, 5% for trades 1-5 years, and 7.5% for trades > than 5 years, per page 15 of the Basel III leverage ratio framework and disclosure requirements).

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